Macroeconomic Definitions

Question 1

Circular flow of income

Answer 1

A model which shows how money is used in an economy

Question 2

The multiplier effect

Answer 2

When an initial injection results in a higher economic growth than the initial injection

Question 3

Marginal propensity to consume

Answer 3

Change in consumption following a change in income

Question 4

Marginal propensity to consume

Answer 4

Change in consumption following a change in income

Question 5

Calculating the value of the multiplier formula

Answer 5

1 / (1 - MPC)

Question 6

Boom

Answer 6

A period when the rate of growth of real GDP is fast and higher than the long-term trend

Question 7

Economic cycle

Answer 7

Short-run fluctuations of natural output (real GDP) around its long-term trend

Question 8

National income

Answer 8

Everything produced, earned and spent in a country

Question 9

Slowdown

Answer 9

A weakening of the rate of growth, real GDP is still rising but increasing at a slower rate

Question 10

Recession

Answer 10

2 successive quarters of negative economic growth

Question 11

Recovery

Answer 11

A phase of the cycle, after a recession, during which real GDP starts to increase and unemployment begins to fall

Question 12

Depression

Answer 12

A prolonged downturn in the economy and where a nations GDP falls by at least 10 per cent

Question 13

Demand-side

Answer 13

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Question 14

Shocks

Answer 14

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Question 15

Supply-side

Answer 15

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Question 16

Supply-side improvements

Answer 16

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Question 17

Supply-side interventions

Answer 17

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